AUSTRAL COKE SCAM

REASONS FOR SCAM

Sebi says Austral Coke in Rs 1000 cr

scam
The Securities and Exchange Board of India on barred Austral Coke and
Projects from raising any further capital on finding that the company was
involved in a fraud amounting to Rs 1,047 crore.
On a day when Austral Coke & Projects said it has acquired 50% stake in Osho Gremach
Mining Limitada in Mozambique, the Securities and Exchange Board of India (Sebi) has
found the company involved in a Rs 1,000 crore accounting scam.
The manufacturer of low-ash metallurgical coke manipulated books by showing
fraudulent purchases and sales to 29 companies associated with Kolkata-based Ajit
Kumar Jindal, the capital markets regulator said.
The taxmen found bogus purchases of Rs 553 crore and sales of around Rs 495 crore.
Jindal has admitted they were false transactions of purchase of raw material as well
as plant and machinery for the company. The company raised Rs 142.3 crore through
a public issue in August 2008 and was planning a meeting to get shareholder approval
for an additional fund raising of $200 million through a qualified institutional placement.
Part of the funds raised through the IPO were shown in the books as utilised
towards purchase of capital goods.
The book-running lead managers and investment bankers for the Austral Coke public
issue were Allbank Finance Ltd Co, PL Capital Markets Pvt Ltd, Saffron Capital Advisors
Pvt Ltd and Elara Capital (India) Pvt Ltd.
 ACTIONS TAKEN

The SFIO probe, the official said, would be carried out under Section 235 of the
Companies Act under which the investigating agency can call for information or
explanation from the company.
The market regulator had said the Income Tax Department had conducted raids at the
business and residential premises of Austral Coke and found bogus transactions to the
tune of Rs 1,047 crore.
Attempts to contact Austral Coke management turned futile. Corporate Affairs
Ministry official had said they found ‘prima facie’ evidences of fund diversion,
manipulation of accounts and tax evasion by the company.
By manipulating the accounts/records, the company has apparently played fraud
on its shareholders. Further, the act of the company, evidently operated or would
operate as a fraud upon any person who deals in the securities of the company.
Thus, from the aforementioned acts, the company appears to have clearly
violated the provisions of Regulation 3 & 4 of the Securities and Exchange Board
of India (Prohibition of Fraudulent and Unfair Trade Practices relating to
Securities Market) Regulations, 2003.
Taking into consideration the seriousness of the alleged manipulation in the
books of accounts of the company, also being satisfied that any further issue of
securities as proposed by the company will not be in the interest of the
investors/shareholders and also in the light of the fact that the company has
convened a board meeting for the purposes of considering further issue of
shares, SEBI as the regulator of the securities market is satisfied that it is
necessary to immediately intervene to prevent further activities which are
detrimental to the interests of the shareholders of the company and the integrity
of the securities market.
In view of the foregoing, in exercise of the powers conferred upon SEBI under
Section 19 of the Securities and Exchange Board of India Act, 1992 read with
Sections 11, 11(4) and 11B thereof and Regulation 11 of Securities and
Exchange Board of India Regulations, 2003, by way of ad interim ex-parte order,
hereby prohibit Austral Coke and Projects Limited from raising any further capital
in any manner, directly or indirectly, whatsoever till further orders.
 CURRENT SCENARIO

Currenty austral coke is functioning normally with a share price of Rs 0.50 per
share at NSE and Rs 0.21 per share at BSE.

CONCLUSION

Corporate frauds represent social and economic liability. The failing ethical values both
at the individual and organizational levels are root cause of this tragic malady. A deep
social revolution touching the core of human hearts and a strong leadership capable
enough to infuse discipline at all levels can be the panacea for getting out of the rot.
Infusing innovative technology tools to arrest the white color frauds are the necessity of
the day. Organizations are needed to nurture and promote ethical culture in the
organizations apart from subjecting themselves to ethical audit at periodical intervals.

LEARNING

An organizational culture can validate behavior that the society would judge as
unethical, particularly when it is mixed with a focus on unrealistic performance goals,
such as maximizing short term performance, no matter what the costs. In such
situations, there is a greater than average chance that the middle level managers will
violate their own personal ethics and engage in unethical behavior.