Mumbai crime branch unearths illegal share trading worth ₹6,840 crore, arrests four

The accused allegedly evaded security transactions tax, capital gain tax, stamp duty, SEBI turnover fee by illegal share trading and caused huge revenue losses to the exchequer, said Mumbai Police

Mumbai crime branch has busted a major illegal share trading racket and arrested four accused from Ghatkopar in the case.

The four alleged also used hawala channels for money transactions for illegal share trading, said Mumbai Police. (Photo for representation)

A scrutiny of the computer systems of the four accused, conducted in the presence of senior Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) officials, has revealed that in the past seven months, they had allegedly unlawfully carried out share trading worth ₹6,840 crore, outside the legitimate systems of BSE and NSE. The police suspect that the accused have evaded multiple government taxes, causing a loss to the government exchequer, worth thousands of crores of rupees. The four alleged illegal share traders also used hawala channels for money transactions, said the police.

According to the police, illegal share trading – commonly known as ‘dabba trading’ – is a proxy unauthorised market with its own trading laws and legislation. It is a process through which a broker routes the client to trade outside the stock exchange. The bucketing acts as an operator who functions away from crowded business areas. Dabba trading is also done through various apps for buying/selling stocks in illegal market. With the help of a software, transactions occur in various parts of the country.

The police said based on reliable information, crime branch unit-7 officers, along with BSE assistant general manager Kiran Sawant and NSE chief manager Prakash Tanna on Wednesday raided two flats in a building in Vikhroli.

“The officers discovered that 11 persons were unlawfully trading in shares without having permission or licences for it. When NSE and BSE officials inspected the Tally software in the accused people’s laptops and computers, it found that the turnover of illegal share trading of an accused, Rajesh Patel, 33, was of ₹4,900 crore between July and October, while another accused, Shailesh Nanda, 38, had a turnover of ₹1,300 crore between June and October. The third accused, Dinesh Bhanushali, 38, had a turnover of ₹639 crore between April and October,” said a police officer, requesting anonymity of name.

The fourth accused has been identified as Mahesh Kataria, 38. The others present at the spot during the raids were the employees of the four accused, said the police. The crime branch has seized cash worth ₹5.9 lakh, 45 mobile phones, three pen drives, five laptops, a computer, seven hard disks and a note-counting machine from the accused.

“The accused, by means of illegal trading, allegedly evaded security transactions tax, capital gain tax, state government stamp duty, SEBI (Securities and Exchange Board of India) turnover fee and exchange trading revenue, causing huge revenue losses to the exchequer,” said another police officer.

Further probe has revealed that the accused had allegedly used code names for their investors. The police are trying to crack these code names.

The accused allegedly accepted money from investors through hawala using code words and did not give any contract note for sale and purchase of shares and crucially, did not inform SEBI.

It is suspected that all these transactions were done in cash through Angadiya facility and the accused invested black money in it, said the police.

The police are also investigating if the money was used for any illegal or terrorism-related activities.

The four accused were remanded in police custody till November 2 by a local court on Thursday. More arrests are likely to take place in the coming days.

Considering the high magnitude of the case, the case has been transferred to the economic offences wing (EOW) for further investigation.