A joint team comprising officers from Mumbai Police’s Economic Offences Wing (EOW) Shares unit and Securities and Exchange Board of India (SEBI) busted one of the biggest over-the-counter (OTC) or off-exchange trading aka ‘dabba trading’ racket in recent times.
Shaha’s flat in Malad (E) where dabba trading took place. Pic/Nimesh Dave
Acting on a tip-off received by the EOW, the team raided a flat in Malad (E) and arrested Vinod Shaha (48), Arun Singh (24) and Pradip Chauhan (37). Cops said Shaha owns the flat and is the mastermind. They added that the annual turnover generated through this dabba trading was worth thousands of crores.
A police officer said, “The accused were produced in the Killa court and have been remanded in police custody till June 16. All three have been booked under sections 420 (cheating), 120 (B) (criminal conspiracy) and 34 (common intentions) of the IPC, and section 23 (1) of the Securities Contracts (Regulation) Act, 1956.”
Investigation revealed that the malpractice had been on for the last two years and the accused managed a turnover of a whopping Rs 5 crore daily. The raid was conducted on Thursday afternoon at Malad. The officers seized 10 cellphones, three hard disks, several pen drives and documents pertaining to shares.
The officer added, “It was all black money. It is one of the biggest dabba trading rackets we have busted in recent times. Investigation is on to unearth other players involved in the case. We are likely to make a few more arrests in the coming days.”
Senior Inspector (EOW) Datta Chavan and Inspector (EOW) Milind Desai, who were part of the raiding team, refused to comment.
What is dabba trading?
This kind of trading is done directly between two parties, without any supervision of an exchange. While a stock exchange has the benefit of facilitating liquidity, mitigating all credit risk concerning the default of one party in the transaction, provide transparency, and maintain current market price, nothing is made public in dabba trading. A dabba operator flouts rules and regulations pertaining Client Protection, including registration, margins, transactions, execution and settlements. The operator evades the Income Tax regulations, which prohibit dealings in cash, and ignores Service Tax requirements. Unlike in real trade, a dabba operator notes down the trade in his personal book and takes cash.