The directive issued by ED on August 3 notifying the exchange to stop all trades has been based on section 33 (2) of the Fera Act of 1973. The shares of Western India Shipyard, Western Paque and Western Industries in question, are held in the name of Nandan Gadgil & Paib Capital Corporation and have been confiscated by the concerned authority since July 2, 1997, under section 63 of Fera.

According to finance ministry sources, about 32,52,300 shares of Western India group were pledged by Nandan Gadgil without the prior approval of the Reserve Bank of India (RBI), which led to the violation of the Act. "Underthe Act, it is mandatory to seek prior permission of RBI in case the shares are pledged with a foreign entity," explained a finance ministry source. This was not done in this case, claimed ministry officials.

A list of these shares sent to the exchanges highlights the names of Jagrook Holding, Shwetambari Leasing & Finance, Raba Portfolio, Mahasharanga Finance & Investment and Sarvajana Finance, on whose names the shares are held.

"These shares held in the name of over five entities were pledged with a foreign bank based in Bahrain," added the source.

According to highly placed market sources, the entire operation which was conducted over two years back, has been based on transfer of these shares on blank certificates, which are currently being scrutinised by ED. Sources also highlighted the show cause notice issued to the company, debarring it from issuing duplicate certificates in the market.

"Since the entire issue is currently being scrutinised by the concerned officials, it is difficult to statethe nature of the problem which could have occurred at the exchange on account of dealing in such shares which have already been termed as being illegal," said an exchange source.

Interestingly, the shares of Western Paque which was traded at a price of Rs 282.50 on August 5, 1994 is currently traded at Rs 3.25 on the BSE.

A similar case has been noted in the case of Western India Shipyard and Western Industries which are quoted currently at Rs 0.80 and Rs 7 respectively.

INSIGHT
A case of too little, too late

Such dramatic moves are typical of the law enforcement agencies, though they seemed to have missed one point, that with the exception of Western India Shipyard, the other two listed companies i.e. Western India Industries and Western Paques have not been traded from January 1996 and May 1997 respectively and there is hardly any hope of these stocks being traded again.