sebi:WTMO/26/MIRSD/2/04

SEBI · SEBI · 2003-07-10 · T. M. Nagarajan, Whole Time Member

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Facts / Headnote

Application for renewal of certificate of registration as Depository Participant rejected

Provisions invoked

• s. 19

Regulations

• Reg. 9
• Reg. 199
• Reg. 24
• Reg. 19(d)

Parties

• Mukesh Babu Securities Limited

Holding

SEBI rejected Mukesh Babu Securities Ltd.'s application for renewal of its certificate of registration as a Depository Participant, finding that renewal would not be in the interests of investors in the securities market under Regulation 19(d) of the SEBI (Depositories and Participants) Regulations 1996.

Full text

Home » Enforcement » Orders » Orders of Chairman/Members Enforcement Enforcement▼ In The Matter Of Rejection Of Application For Renewal Of Certificate of Registration Of Mukesh Babu Securities Limited, Depository Participant. Feb 12, 2004 | Orders : Orders of Chairman/Members SECURITIES AND EXCHANGE BOARD OF INDIA

WTMO/26/MIRSD/2/04 Mukesh Babu Securities Ltd. (hereinafter referred to as depository participant) was registered with Securities and Exchange Board of India (SEBI) as a Depository Participant vide registration No. IN-DP-NSDL-69-98, under the provisions of SEBI (Depositories and Participants) Regulations 1996 (hereinafter referred to as the said regulations). The certificate of registration granted to the depository participant expired on October 5, 2003. The depository participant applied, through National Securities Depository Ltd. (NSDL), for renewal of certificate of registration (vide its application dated July 10, 2003). While forwarding the application of the depository participant for renewal of certificate of registration, the depository, NSDL had pointed out that as per the press report, Shri Mukesh Babu, Chairman of the depository participant, had been "arrested" and that the DP had been advised by NSDL not to open any new client accounts and that the same was confirmed by DP. It was observed that Shri Mukesh Babu, had in fact, been taken into custody by CBI in connection with Madhavpura Mercantile Cooperative Bank (MMCB) scam. It was reported that during the investigation by CBI it had been revealed that the various accounts of Shri Mukesh Babu with MMCB were overdrawn to the tune of Rs.200 crore and that most of the transactions had been done on the computer terminal of M/s. Madhur Shares and Stocks of Ahmedabad, a sub broker of M/s. Mukesh Babu Securities Ltd.,

said Regulations. Shri Mukesh Babu, Chairman of the DP, accompanied by Shri K. Chandrasekhar, Company Secretary availed of the opportunity and appeared, on behalf of the DP and made the submissions before me on December 18, 2003. This was followed by written submission vide letter dated 26th December 2003. It was argued on behalf of DP that Shri Mukesh Babu had been "taken into custody" by CBI for interrogation and "not arrested" as stated by NSDL and that after interrogation he was granted bail. It is immaterial whether Mukesh Babu was "taken into custody" or "arrested" as the difference between the two descriptions is no more than that between "tweedledum" and "tweedledee". What is relevant is that Shri Mukesh Babu had been "taken into custody" by CBI for interrogation in connection with cheating of the Co-operative Bank. It is gathered that the case is still pending. Another argument put forth by Mukesh Babu was that the CBI case had nothing to do with securities market at all. I do not agree with this contention. Shri Mukesh Babu is the Chairman of DP and substantially owns and manages the entity. In view of his alleged involvement in the Co-operative Bank scam in respect of which CBI case is still pending, an entity substantially owned and managed by him as Chairman cannot continue to be entrusted with depository operations as it could turn out to be to the detriment of the interests of investors in the securities market. Mere satisfaction of a few basic eligibility crit

Source: SecMarx — sebi:WTMO/26/MIRSD/2/04. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.