12 years and running: SFIO case in court

INDORE: Way back in 2003, a financial fraud involving the swapping of 100 million equity shares between Design Auto System Ltd and Bonanza Biotech Ltd became case number 3 and 4 of the serious frauds investigation office (SFIO) of the union corporate affairs ministry.

The cases will come up for hearing in January 2016.

In February 2009, Company Law Board authorised government to appoint six directors to run Design Auto Systems Ltd. In April 2009, the Centre, which took over the two companies, appointed chartered accountant Manoj Fadnis (Indore), Ramesh Vaish (New Delhi), Supreme Court advocate Ravi Nath (New Delhi) and AK Tandon (New Delhi) as nominee directors to run Bonanza Biotech Ltd (BBL). Next year, chartered accountant Santosh Mucchal company secretary Ashok Mehta (both from Indore) were added on BBL board.

However, they resigned due to lack of centre’s support. “We resigned two years back as government did not give us resources, powers to run companies. There was no body to listen to us. Our appointment was a formality,” said Santosh Mucchal.

Another former director, requesting anonymity, said, “The Centre either shouldn’t have taken over the two companies or should have auctioned/handed over it to businessmen who could run them professionally.”

In 2001, Design Auto Systems Ltd company MD Saversh Garg, wife Gita Garg and other directors made a preferential allotment of 10 crore of equity shares to Bonanza Biotech Ltd (BBL) under a swap agreement.

This was done without surrendering the physical share certificates to the Central Depository Securities Ltd and without getting them listed or having in-principle listing permission from Bombay Stock Exchange (BSE). The BSE suspended the company’s share trading in 2002, but by then 9.8 million shares had been already sold by the accused.

Hearing a petition filed by the Centre, the Company Law Board held in February 2009, that the allotment of preferential shares was illegal, and declared that directors of two companies were “not proper persons to hold office.”

However, Sarvesh Garg and others appealed against the CLB order before the Indore bench of Madhya Pradesh High Court. The case is still pending for disposal.

The case, along with 42 other SFIO cases, will come up for hearing in January 2016, assistant solicitor general Deepak Rawal said. “The high court will hear them together after winter vacation.”

Both companies stand closed since 2003.