'Tehelka was responsible for stock market crash'

NEW DELHI, AUG. 30. The Centre today accused the Tehelka portal of being responsible for the share market crash after March and pleaded with Justice Venkataswami Commission to include within its probe this new aspect.

The Additional Solicitor-General, Mr. Kirit Rawal, submitted that in response to the Commission's direction, the Government was filing an affidavit giving crucial factual information about the activities and investments of First Global Stock Investing, a company owned by Mr. Shankar Sharma and his associates, and their continuous supervision of the activities of tehelka.com.

As a result of these operations (allegedly manipulated after the Tehelka expose), investor confidence in the capital market had been shattered and benefits, if any, accruing from Operations West End, had been more than outweighed by the loss inflicted on the country's economy and social fabric, Mr. Rawal said. Alleging that the tehelka.com's motive did not reflect an ``honest journalistic endeavour,'' he urged the Commission to probe this aspect.

Elaborating, Mr. Rawal said Mr. Sharma bought 6,117 shares of Buffalo Network, owner of tehelka.com, at a premium of approximately Rs. 5,700 per share and on the same day, transferred 2,500 shares without any premium to Mr. Tarun Tejpal, Chief Executive, tehelka.com, at par. This was done to make a show of First Global having 10 per cent control over Buffalo Network, whereas 98 per cent of finances of Buffalo came from First Global. Almost Rs. 6 crores were invested by First Global in Buffalo Network.

Mr. Rawal submitted: ``Acting on the premise that after the Tehelka expose the share market is bound to crash, Mr. Sharma and his associates started building up bear positions in the share market to make profits out of the falling share market.'' The operations of First Global were approximately Rs. 6,200 crores between January and April 2001, while its turnover for the entire previous year was only Rs. 6,000 crores.

As a result, immediately after the Tehelka expose, the share market crashed and the total loss of capitalisation of the stock market was about Rs. 1,01,700 crores. The Bombay Stock Exchange Sensex fell by 227 points on March 13 (when the Tehelka expose came to light) and by 604 points in the next 30 days.

Mr. Rawal said the profits made by Mr. Sharma and his associates was under SEBI investigation. Motives other than economic were being probed and the Government would file additional affidavits as and when additional details were available.