Corporate lawyer HP Ranina says the NSEL scam may come under the Enforcement Directorate's (ED) ambit if it is proved that money was siphoned off.
I think the issue of recoveries is also very important. Where has the money gone, where is the trail of the money.
HP Ranina
Corporate Tax Lawyer
In an interview to CNBC-TV18, corporate lawyer HP Ranina shares his views on the repercussions of National Spot Exchange Limited former MD's arrest late Wednesday evening.
Below is the edited transcript of the interview to CNBC-TV18's Latha Venkatesh and Sonia Shenoy.
Latha: Do you think it is easy to lift the corporate veil and use Financial Technologies (FTIL) profits, existing stock of reserves and the profits they generate to pay off NSEL, is that a link that can be easily established?
A: It can be established based on certain facts, but I think it will be difficult to do that. It will lead to long run litigation which may be protracted and costly. Ofcourse that can be done but it will be a very stupendous task to prove the link and then to recover the money from the company.
Also read: FTIL's value preservation paramount in MCX stake sale
Latha: Minority shareholders of FT will be worried that what is there in the company if it is going to be regularly bled out, should they have that worry at all or is this process going to take so long that they don't have to worry about it just yet?
A: Worry will always be there and though the process may take very long, it only means that the agony will last for a longer time. So, certainly they will be in serious trouble in next few months.
I think the issue of recoveries is also very important. Where has the money gone, where is the trail of the money. Those people who have borrowed money from the exchange by giving false certificates of the stocks which they held, they are also going to be investigated. They may possibly be arrested if it is found that the money has been siphoned out.
Sonia: The Mumbai police is now investigating a lot of brokers who have an exposure to this scam. If any of them are found guilty will it be an arrest that will be done or will it just be some sort of financial liability that will be put on these brokers?
A: If it is found that they were involved in this and that they had given false figures and on basis of those false figures money was borrowed by them, then it is a case of fraud under the Indian Penal Code and they will be arrested if the fraud is established. So, that is a very serious charge that can be levied against these borrowers. That is where the real crux is, how to recover the money which has been siphoned out. Their assets would be frozen and if that money has been sent outside India, then again it will raise issues with the Enforcement Directorate (ED) coming in.
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Financial Tech stock price
On May 08, 2014, at 11:10 hrs Financial Technologies was quoting at Rs 276.70, down Rs 14.55, or 5 percent. The 52-week high of the share was Rs 870.30 and the 52-week low was Rs 102.05.
The company's trailing 12-month (TTM) EPS was at Rs 50.03 per share as per the quarter ended December 2013. The stock's price-to-earnings (P/E) ratio was 5.53. The latest book value of the company is Rs 580.93 per share. At current value, the price-to-book value of the company is 0.48.
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