May 21, 1997
PR No. 56/1997

Financial Irregularities in CRB Capital Markets Ltd.

Several irregularities/illegalities have been reported in the operations of CRB Capital Markets Ltd which is a non-banking finance company (NBFC). In regard to its operation as NBFC, RBI as the regulator of NBFCs, have already initiated action against it. However as these irregularities/illegalities are likely to have a bearing on the operations of the group in their activities in the fields of merchant banking, mutual fund and stock broking, SEBI has also considered initiating action in regard to such activities of the group which are within the purview to SEBI Act. This is being done in order to prevent 
a] the affairs of such entities from being conducted in a manner which is detrimental to the interests of investors or securities markets; and
b] to secure the proper management of any such entities or person associated.
Specifically, the following actions have been taken

  1. IIT Corporate Services Ltd which is the custodian of CRB Mutual Fund, has been directed not to dispose of any of the securities held in its custody, on behalf of CRB Mutual Fund, and submit inventories of the securities held in the portfolio of scheme of the Fund. The directive has been issued under Section 11B of the SEBI Act. 

  2. CRB Mutual Fund on which a ban was imposed not to launch any new schemes for 9 months upto June 1996 is now being reimposed till further orders under section 11B of the SEBI Act. It may be mentioned here that after August 1994 no scheme of CRB Mutual Fund had been launched or allowed to be launched. A scheme for which offer document was recently filed with SEBI has also been prevented from being launched.

  3. An interim report has been obtained by SEBI from M/s Kalyaniwalla Mistry the firm which was appointed by SEBI a few months ago to inspect the CRB Mutual Fund for the second time. The interim report shows several irregularities which are being looked into. It might be recalled that for the first time the CRB Mutual Fund was inspected by SEBI through M.P. Chitale & Co for the year 1994-95. This led to the appointment of any enquiry officer on the basis of whose report SEBI asked CRB Mutual Fund not to launch any new schemes for nine months ending on 30th June 1996.

  4. SEBI had asked a report from the trustees of the CRB Mutual Fund and also called for any emergency meeting The trustees were either not available or had resigned. The legal implications of this are being examined.

  5. The trading of the scrips of CRB group viz. CRB Capital Markets Ltd, CRB Corporation Ltd, CRB Share Custodian Services Ltd and CRB Arihant Mangal scheme have been indefinitely suspended by BSE with the approval of SEBI.

  6. The bolt terminal of the broking firm of the group viz. CRB Sharebroking Ltd member of BSE has been closed by BSE. 

  7. CRB Capital Markets Ltd as Category I Merchant Banker has been prohibited from undertaking any activity under section 11B of the SEBI Act.